Why you shouldn’t reach agreements in the pub!

Here’s an interesting article recently published by the FSB (Federation of Small Businesses):

The media recently reported on a case concerning Mike Ashley, the majority shareholder of the Sports Direct chain.

What happened?

Mr Blue worked as a consultant for the Sports Direct group. Mr Blue and Mr Ashley had arranged a meeting with representatives from another company. The group met at Sport Direct’s offices and went to a nearby pub, the Horse and Groom. It turned into an evening of drinking. Mr Blue left the pub at around 8:30pm and the others moved to another bar.

After this gathering Mr Blue argued that he had reached a verbal agreement with Mr Ashley in the Horse and Groom pub that he would be entitled to £15 million if he could get the Sports Direct share price up to £8 per share. At that stage it was trading around £4 per share.

The share price did reach £8 per share about 12 months later. Mr Blue claimed that he tried to raise the issue during the interim period and shortly after the shares reached £8, but he did not achieve anything. Mr Ashley transferred £1 million to Mr Blue which was seen by Mr Blue as confirmation of the agreement. However, during the trial Mr Ashley gave evidence that it was simply a bonus payment for other work performed by Mr Blue.

Mr Blue sued Mr Ashley for the balance of £14 million.

The decision

The judge dismissed the claim and in doing so, set out several reasons why he did so. The main ones were:

This meeting was arranged to introduce Mr Ashley to potential new service providers, not to discuss Mr Blue’s remuneration;

The alleged offer was too vague and uncertain for it to be taken as seriously meant;

None of the witnesses, including the one witness who did not drink alcohol during the meeting, thought that Mr Ashley was being serious;

The evidence also showed that Mr Blue himself did not initially construe the offer as a serious one and that he only began to attach significance to it as the Sports Direct share price began to climb.

Additionally, the judge also determined that the payment of £1 million was unrelated to the agreement allegedly made at the pub.

Lastly, the court found that no reasonable person present at the meeting would have concluded that Mr Ashley’s offer was serious and intended to conclude a contract.

The lesson to be learned here is that you should always try to get agreements in writing.